PSEG considers exiting fossil-fuel generation, other non-nuclear power businesses

By Eric Strauss
Newark | Jul 31, 2020 at 12:38 pm

Public Service Enterprise Group said Friday it intends to explore strategic alternatives for PSEG Power’s non-nuclear generating fleet, which generates power via fossil fuels and a solar portfolio located in New Jersey, New York and other nearby states.

The Newark-based utility said in a news release that exiting the fossil generation business would accelerate its transition to a primarily regulated and contracted business, with a zero-carbon generation platform.

“Our intent is to accelerate the transformation of PSEG into a primarily regulated electric and gas utility — a plan we have been executing successfully for more than a decade,” Chairman, CEO and President Ralph Izzo said in a prepared statement.

PSEG Power’s non-nuclear generating fleet includes more than 6,750 megawatts of fossil generation in New Jersey, Connecticut, New York and Maryland, as well as 467 megawatts of solar portfolio in various states.

“A separation of the non-nuclear assets would reduce overall business risk and earnings volatility, improve our credit profile and enhance an already-compelling (environmental, social and governance) position driven by pending clean energy investments, methane reduction and zero-carbon generation,” Izzo said. “We recognize the shift in investor preference toward owning regulated utility businesses without commodity exposure to merchant generation and related earnings volatility.

“We believe (Public Service Electric & Gas) is among the best utilities in the country, and that our valuation should align with that profile.”

PSEG plans to retain ownership of PSEG Power’s existing nuclear fleet, which it said is necessary for New Jersey to meet long-term carbon reduction goals and more.

Any potential transaction would be marketed starting in the fourth quarter and completed in 2021, the utility said. Goldman Sachs and Wachtell, Lipton, Rosen & Katz will serve as advisers for the evaluation.

PSEG noted that it considers its non-nuclear business a “relatively small” part of the utility, and expects the change will impact neither shareholder dividend policy, nor PSE&G or PSEG Long Island customers, operations or tariffs.

The utility noted it continues to evaluate potential investments in offshore wind projects, including Ørsted’s Ocean Wind project, in New Jersey and elsewhere.

Any change would be subject to customary regulatory approvals, PSEG noted.

The announcement came on the same day as PSEG’s second-quarter earnings report, which noted that both net income and operating earnings exceeded those in the year-ago quarter.

“We are pleased to report solid operating and financial results,” Izzo said. “… Our employees continue to effectively respond to the challenges and requirements of providing essential utility and power services under extraordinary conditions.”

Eric Strauss | estrauss@roi-nj.com | @acerimrat